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BOND v. DENTZER

July 25, 1973

Dorcas BOND and Barbara Baldwin, on behalf of themselves and all others similarly situated, Plaintiffs,
v.
William H. DENTZER, Individually and as Superintendent of the Banking Department of the State of New York, et al., Defendants


James T. Foley, Chief Judge.


The opinion of the court was delivered by: FOLEY

JAMES T. FOLEY, Chief Judge.

OPINION -- JUDGMENT -- ORDER PART I -- FACTS

 The parties are in accord on the material facts in this case. Summary judgment is appropriate in such circumstances and the plaintiffs have filed a motion for the same. The defendants move to dismiss the complaint upon three stated grounds.

 Plaintiffs Bond and Baldwin are of low-income and have been represented by the Legal Aid Society of Albany. They are each alleged to have owed amounts of under three hundred dollars to defendants, the Beneficial Finance Co. and the Protective Loan Corp. (hereafter 'finance companies'). Contained in the debt contracts of each plaintiff were 'wage assignment agreements' as authorized by the New York State Personal Property Law, Article 3-A entitled "Assignment of Earnings" (§§ 46-49), McKinney's Consol. Laws, c. 41. The source of this controversy is the claim by the finance companies that there is a legal debt in existence, that a default has occurred thereon, and that they are entitled under the statute and the wage assignment agreement to execute against the wages of plaintiffs. The plaintiffs' position is simply that they possess valid legal defenses to these debts, but cannot assert them under these statutes in a way that guarantees their rights of due process. The single issue presented in the instant litigation is whether the procedure provided for in the New York Assignment of Earnings statute is adequate for resolution of this controversy within the meaning of the Fourteenth Amendment's due process clause. While plaintiffs also base their claims on the equal protection clause, it is unnecessary to consider this issue since the holding of this court grants full relief on the due process issue. See Laprease v. Raymours Furniture Co., 315 F. Supp. 716, 724-725 (N.D.N.Y. 1970) (three-judge court). Other claims in this case, upon which there is less than full agreement, relate to the compliance with the various procedures of this statute. But these are essentially questions of state law and are unnecessary to the constitutional question addressed by this case.

 Four preliminary issues of procedure were presented originally in this case. They were:

 
1. Whether this action could proceed as a class action;
 
2. Whether the N.Y. Superintendent of Banking was a proper party, necessitating the convening of a three-judge court for review of this statute;
 
3. Whether this court has jurisdiction of the controversy under Title 42 U.S.C. § 1983; and
 
4. even if there is jurisdiction, whether this court should postpone or delay its exercise under the abstention doctrine.

 By my previous decision, the motion by plaintiffs to convene a three-judge court was denied and the motion to dismiss insofar as the action is sought to be maintained as a class action was granted. See Bond v. Dentzer, 325 F. Supp. 1343, 1352 (N.D.N.Y. 1971), petition for mandamus denied, Dk. No. 71-1467 (2d Cir. May 14, 1971). It is noteworthy at this juncture that subsequent to my previous decision the Supreme Court decided Lynch v. Household Finance, 405 U.S. 538, 92 S. Ct. 1113, 31 L. Ed. 2d 424 (1972), which expressly rejected the personal liberty-property doctrine of Eisen v. Eastman, 421 F.2d 560 (2d Cir. 1969) which I had discussed and followed in my Bond decision. See Lynch v. Household Finance, supra, 405 U.S. at 542, 92 S. Ct. 1113. The Lynch case along with the recent landmark case of Fuentes v. Shevin, 407 U.S. 67, 92 S. Ct. 1983, 32 L. Ed. 2d 556 (1972), had been awaited to help in the resolution of the remaining issues of this case. The many subtle questions raised by these issues, some of which were alluded to and briefly discussed in my prior decision, have been answered by the Supreme Court in these and other recent cases, cited also in this decision.

 PART II -- JURISDICTION

 Section 1983 of the Civil Rights Act provides a cause of action against:

 
Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory, subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress.

 42 U.S.C. § 1983 (emphasis supplied).

 This statute clearly draws no distinction whether the primary actor is a "state officer or agent" or a "private individual". "Every person" reasonably means any person, publicly or privately characterized. (emphasis supplied). See Adickes v. Kress & Co., 398 U.S. 144, 152, 90 S. Ct. 1598, 26 L. Ed. 2d 142 (1970). Essentially, it is the nature of the act, not the person, which is the determinative factor in resting jurisdiction upon Section 1983. Civil Rights Cases, 109 U.S. 3, 54-60, 3 S. Ct. 18, 27 L. Ed. 835 (1883) (Harland, J. dissenting); see also Hall v. Garson, 430 F.2d 430, 439 n. 20 (5th Cir. 1970).

 Of course, in circumstances where the constitutional deprivation is by an agent or officer of the state, there is usually no question that acts pursuant to that title are under color of state law. But this only means that acts performed by private individuals supported by the state will be a subtler form of state action under § 1983, but no less offensive for this reason if the result is constitutional deprivation. United States v. Price, 383 U.S. 787, 794-795, 86 S. Ct. 1152, 16 L. Ed. 2d 267 (1966).

 There are two elements necessary to establish a cause of action under § 1983. The first element must establish that the plaintiff was deprived of a right secured by the Constitution; the second, that the defendant acted under color of law. Adickes v. Kress & Co., supra, 398 U.S. at 150, 90 S. Ct. 1598. For purposes of the following "state action" discussion herein, it will be assumed arguendo, that the deprivation of a constitutional right can be shown. (See Part IV, infra).

 The variety of acts where a state can be involved in the deprivation of an individual's Constitutional rights is great. However, there have developed at least four generic patterns where state acts may be said to deprive a person of these rights:

 
A. Where the state acts through its own designated officers and agents.
 
B. Where the state becomes a 'silent partner' in unconstitutional acts or where it adopts private interests and acts as its own.
 
C. Where the state authorizes, encourages, or creates an atmosphere where private interests deprive individuals of their constitutional rights. This may take the form of state inaction, whereby private individuals acting with the blessing of the state can accomplish what the state could not do directly.
 
D. Where functions normally or traditionally performed by the state are delegated to or performed by private interests.

 A. STATE OFFICER OR AGENT

 By my previous decision [325 F. Supp. 1343, 1348-1349 (N.D.N.Y. 1971), petition for mandamus denied, Dk. No. 71-1467 (2d Cir. May 14, 1971)], the State Banking Superintendent was dismissed from this action as an improper party. Fed. R. Civ. Proc. 21; see also Committee for Public Education and Religious Liberty v. Rockefeller, 322 F. Supp. 678, 685-686 (S.D.N.Y. 1971); Hernandez v. European Auto Collision, 346 F. Supp. 313, 316 (E.D.N.Y. 1972), rev'd on other grounds, 487 F.2d 378, Dk. No. 406 (2d Cir. 1973); McCormick v. First National Bank of Miami, 322 F. Supp. 604, 608 (S.D. Fla. 1971); Klim v. Jones, 315 F. Supp. 109, 112-113 (N.D. Cal. 1970); Moody v. Flowers, 387 U.S. 97, 102, 87 S. Ct. 1544, 18 L. Ed. 2d 643 (1967); Wilentz v. Sovereign Camp, 306 U.S. 573, 579-580, 59 S. Ct. 709, 83 L. Ed. 994 (1939); compare, Barber v. Rader, 350 F. Supp. 183, 186 (S.D. Fla. 1972) (three-judge court) (per curiam). Thus no state official remains as a party-defendant and hence there is no "pure" state action in the sense previously discussed, and this case is inappropriate for the convening of a three-judge court.

 Notwithstanding the absence of acts performed directly by the state through a designated agent, I do find that there is state action of the kind under principles "B-D" hereinafter discussed.

 B. PARTNERSHIP

 Burton v. Wilmington Parking Authority, 365 U.S. 715, 81 S. Ct. 856, 6 L. Ed. 2d 45 (1961) provides the best example of the state becoming a silent business partner with private interests. In this case the "Eagle" restaurant, a privately owned concern, leased building and parking facilities from a state agency. The Court held that discrimination practiced by the Eagle was state action because:

 
[the] State has so far insinuated itself into a position of interdependence with Eagle that it must be recognized as a joint participant in the challenged activity . . .

 Id., at 725, 81 S. Ct. at 862.

 There was a mutuality of economic interests and a coordinated effort to discriminate, i.e., the use by the restaurant of a public building and public parking-lot facilitated their "private" acts of discrimination. In Adickes v. Kress & Co., supra, 398 U.S. at 152, 90 S. Ct. 1598, the same principle is expressed in circumstances similar to Burton. There, a private interest linked with a state custom or policy was viewed as joint action that deprived persons of their constitutional rights, even though the private interest was the dominant actor. Similarly, under certain kinds of state liquor license regulation private interests are given such economic advantages that they become business partners with the state in the regulation. Bennett v. Dyer's Chop House, Inc., 350 F. Supp. 153, 154-155 (N.D. Ohio 1972); Seidenberg v. McSorleys' Old Ale House, Inc., 317 F. Supp. 593, 603 (S.D.N.Y. 1970). The acts of the private interest in depriving persons of constitutional rights in these circumstances are the acts of the partnership and are attributable to the public or state interest, ergo, they are state action under § 1983. The recent holding in Moose Lodge No. 107 v. Irvis, 407 U.S. 163, 92 S. Ct. 1965, 32 L. Ed. 2d 627 (1972), to my mind is not inconsistent with this view. The Court there held that the facts did not show an economic mutuality that advanced the discriminatory acts of the private interest; hence no state action based on a "partnership" was formed. Id., at 177, 92 S. Ct. 1965.

 The judicial branch of state government may also be the silent partner, using its power to further the acts of private interests which deprive a person of constitutional rights. Shelley v. Kraemer, 334 U.S. 1, 19, 68 S. Ct. 836, 92 L. Ed. 1161 (1948); Brinkerhoff-Faris Co. v. Hill, 281 U.S. 673, 682, 50 S. Ct. 451, 74 L. Ed. 1107 (1930). Such procedures are most common to the creditor-debtor sphere of law where creditors, by virtue of their economic power have been allowed to circumvent some legal procedures. Most of these procedural shortcuts can ...


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